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Annual Report

2012-13

ICRA LimitedAn Associate of Moodys Investors Service

www.icra.in

Enhancing Business Value through Intellectual Leadership


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ICRA LIMITED

TWENTY-SECOND ANNUAL REPORT

2012-13A N N U A L R E P O R T


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Contents

ICRA at a Glance ................................................................................................................................... 5

ICRA Limited

Board of Directors ................................................................................................................................... 13

Senior Management ................................................................................................................................ 15

Directors Report ..................................................................................................................................... 16

Annexures to the Directors Report ............................................................................................................ 26

Corporate Governance Report.................................................................................................................. 28

Auditors Certificate on Corporate Governance.......................................................................................... 54

Certificate by Chief Executive Officer and Chief Financial Officer ................................................................ 55Declaration by Managing Director on Code of Conduct ............................................................................. 56

Management Discussion and Analysis Report ............................................................................................. 57

Auditors Report ...................................................................................................................................... 69

Annexure to the Auditors Report ............................................................................................................... 71

Balance Sheet ......................................................................................................................................... 74

Statement of Profit and Loss ...................................................................................................................... 75

Notes to the Financial Statements ............................................................................................................. 76

Cash Flow Statement of ICRA Limited ........................................................................................................ 96

Financial Highlights of ICRA Limited .......................................................................................................... 98

ICRA: Selective Data/Ratio Analysis ........................................................................................................... 99

Frequently Asked Questions .................................................................................................................... 100

Group ICRA

Auditors Report on the Consolidated Financial Statements........................................................................ 104

Consolidated Balance Sheet ................................................................................................................... 106

Consolidated Statement of Profit and Loss ............................................................................................... 107

Notes to the Financial Statements ........................................................................................................... 108

Cash Flow Statement of Group ICRA ...................................................................................................... 125

Statement pursuant to Section 212 of the Companies Act, 1956 ............................................................... 127

Statement containing Brief Financial Details of Subsidiary Companies.... .............. 128

Financial Highlights of Group ICRA......................................................................................................... 129

Group ICRA: Selective Data/Ratio Analysis .............................................................................................. 130

Notice of the Twenty-Second Annual General Meeting .................................................................. 131


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AnnuAl RepoRt 2012-13 ICRA lIMIteD

IN MEMORIAM

Mr. Kalyan Sanjibon Banerji (April 7, 1939March 21, 2013), eminentbanker and distinguished expert on trade and banking policy. He was aMember of the Board of Directors of ICRA Limited between August 1991 andJune 1993. ICRA owes Mr. Banerji a large debt of gratitude for the directionhe provided to the company during the start-up years.


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IN MEMORIAM

Mr. Ananthakrishnan Lakshmanaswamy Mudaliar (September 7,1925January 2, 2013), distinguished industrialist, corporate luminaryand educationist. He was a Member of the Rating Committee of ICRA Limitedbetween September 1992 and August 1999. ICRA remains indebted toMr. Mudaliar for the valuable guidance it received from him in the initial years.


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ICRA at a Glance

ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) was set

up in 1991 by leading financial/investment institutions, commercial banks and financial services

companies as an independent and professional Investment Information and Credit Rating Agency.

Today, ICRA, a full-service Credit Rating Agency with its shares listed on the BSE and the National

Stock Exchange, has six subsidiaries: ICRA Management Consulting Services Limited

(IMaCS); ICRA Techno Analytics Limited (ICTEAS); ICRA Online Limited (ICRON); PT ICRA

Indonesia (ICRA Indo); ICRA Lanka Limited (ICRA Lanka), and ICRA Nepal Limited (ICRA

Nepal). Together, ICRAand its subsidiaries, along with their subsidiaries, form the ICRA Group of

Companies, that is, Group ICRA.

1 through its Group company Moodys Investment Company India Private Limited

Group ICRA

Software Solutionsand Services

ICRA Techno Analytics

Limited (ICTEAS)

Credit Rating/Grading

ICRA Limited

(ICRA)

Management Consulting

ICRA Management Consulting

Services Limited (IMaCS)

Information Services/KPO

ICRA Online Limited

(ICRON)

ICRASapphire Inc.

(ICSAP)

PT ICRAIndonesia

(ICRAIndo)

ICRANepal

Limited

(ICRANepal)

PragatiDevelopment

Consulting Services

Limited (PDCSL)

IMaCSVirtus Global

Partners, Inc.

(IVGP)

ICRALanka

Limited

(ICRALanka)

ICRA GlobalCapital, Inc.

(IGCI)

BPA Technologies, Inc.

Alliance with Moodys Investors Service

The international Credit Rating Agency Moodys Investors Service1 is ICRAs largest shareholder. Theparticipation of Moodys is supported by a Technical Services Agreement, which entails Moodysproviding certain high-value technical services to ICRA. Specifically, the agreement is aimed atbenefiting ICRAs in-house research capabilities, and providing it with access to Moodys globalresearch base. The agreement also envisages Moodys conducting regular training and businessseminars for ICRA analysts on various subjects to help them better understand and manage conceptsand issues relating to the development of the capital markets in India. Besides this formal trainingprogramme, the agreement provides for Moodys advising ICRA on Rating-products strategy, and theRatings business in general.

BPA

Technologies

Pte. Ltd.

BPA

Technologies

Pvt. Ltd.


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The ICRA Factor

Facilitating efficiency in business...

ICRA information products, Ratings, and solutions reflect independent, professional and impartialopinions, which assist businesses enhance the quality of their decisions and help issuers access abroader investor base and even lesser known companies approach the money and capital markets.

The research factor...

We strongly believe that quality and authenticity of information are derivatives of an organisations

research base. We have dedicated teams for Monetary, Fiscal, Industry and Sector research, and apanel of Advisors to enhance our in-house capabilities. Our research base enables us to maintain thehighest standards of quality and credibility.

Committed to the development of the financial market...

The focus of ICRA in the coming years will continue to be on developing innovative concepts andproducts in a dynamic market environment, generating and promoting wider investor awareness andinterest, enhancing efficiency and transparency in the financial market, and providing a healthierenvironment for market participants and regulators.

Our products and services are designed to:

Provide information and guidance to institutional and individual investors/creditors. Enhance the ability of borrowers/issuers to access the money market and the capital market for

tapping a larger volume of resources from a wider range of the investing public. Assist the regulators in promoting transparency in the financial markets. Provide intermediaries with a tool to improve efficiency in the funds raising process.

ICRA at a Glance


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ICRA at a Glance

Group ICRAThe Services Spectrum*

* The list of services is indicative and not exhaustive

ICTEAS ICRONIMaCS

CONSULTING SERVICES Policy Advisory Strategy Risk Management Capacity Building Process Re-engineering Transaction Advisory Development Consulting

www.imacs.in

IT SOLUTIONS/ANALYTICS/ENGINEERING Information Technology

Solutions- Client-Server Applications- Web-centric Applications- Mobile Applications- Software Services in Disaster

Response Initiative

- Customization/ImplementationServices on OracleE-Business Suite

Business Intelligence/Analytics- Predictive Modelling

Solutions- Data Mining Solutions- Business Intelligence andAnalytics Solutions

Engineering Services- Multidisciplinary ComputerAided Engineering DesignServices

- Resourcing Services

www.icteas.com

FINANCIAL INFORMATIONPRODUCTS AND SERVICES Mutual Fund and ULIP Data

and Content Provider Investment Research and

Analytics Wealth and Transaction

Management SoftwareProducts

IT Tools for Financial Planningand Analytics

Software Services

KPO SERVICES(BACK-END ANALYTICALSERVICES SUPPORT) Data Services Accounting Services Electronic Conversion of

Financial Statements Research Analytics

www.icraonline.com

ICRA

RATING SERVICES Credit Rating Structured Finance Rating Bank Loan Rating Project Finance Rating Mutual Fund Rating Claims Paying Ability of

Insurance Companies Issuer Rating

**The operations of PT ICRAIndonesia (ICRA Indo) are limitedto the Indonesian market

www.icraindonesia.com

ICRA Indo**



***The operations of ICRA LankaLimited (ICRA Lanka) are limitedto the Sri Lankan market

www.icralanka.com

ICRA Lanka***

RATING SERVICES Credit Rating Bank Loan Rating Corporate Governance Rating Stakeholder Value and

Governance Rating Rating of Claims Paying Ability

of Insurance Companies Project Finance Rating Mutual Fund Rating Performance and Credit Rating

of Small-Scale Enterprises Rating of Parallel Marketers of

LPG/SKO

GRADING SERVICESIPOs, Microfinance Institutions,Construction Entities, RealEstate Developers and Projects,Education Institutes, MaritimeTraining Institutes

EQUITY RESEARCH SERVICE

INDUSTRY RESEARCH

www.icra.in



****The operations of ICRA NepalLimited (ICRA Nepal) are limitedto the Nepalese market

www.icranepal.com

ICRA Nepal****


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ICRA at a Glance

Range of Services

Rating ServicesAs an early entrant in the Credit Rating business, ICRA Limited (ICRA) is one of the most experiencedCredit Rating Agencies in the country today. ICRA rates rupee-denominated debt instruments issued bymanufacturing companies, commercial banks, non-banking finance companies, financial institutions,public sector undertakings and municipalities, among others. ICRA also rates structured obligationsand sector-specific debt obligations such as instruments issued by Power, Telecom and Infrastructurecompanies. The other services offered include Corporate Governance Rating, Stakeholder Valueand Governance Rating, Credit Risk Rating of Debt Mutual Funds, Rating of Claims Paying Abilityof Insurance Companies, Project Finance Rating, Line of Credit Rating and Valuation of PrincipalProtectedMarket Linked Debentures (PPMLD). Further, ICRA, along with National Small IndustriesCorporation Limited (NSIC), has launched a Performance and Credit Rating Scheme for Small-ScaleEnterprises in India. The service is aimed at enabling Small and Medium Enterprises (SMEs) improvetheir access to institutional credit, increase their competitiveness, and raise their market standing.

PT ICRA Indonesia (ICRA Indo), a subsidiary of ICRA, offers a wide range of Rating services in theIndonesian market, including Credit Rating of rupiah-denominated debt instruments issued by corporateentities, banks, finance companies and financial institutions, service companies and infrastructure sectorcompanies; Issuer Rating of corporate entities, banks, finance companies and financial institutions,service companies, infrastructure sector companies and small & medium sector companies; StructuredFinance Rating of asset-backed and mortgage-backed securitization transactions, among others; BankLoan Rating based on the Basel II Accord; Project Finance Rating; Mutual Funds and Fund HouseRatings; Municipal Bonds Rating and Claims Paying Ability Rating of insurance companies.

ICRA Lanka Limited (ICRA Lanka), a wholly-owned subsidiary of ICRA, offers a wide range ofRating services in the Sri Lankan market, putting into use parent ICRAs accumulated experience inthe areas of Credit Rating, Grading, and Investment Information. Its Rating focus is on entities mainlyin the financial sector, besides long-, medium-, and short-term debt instruments issued by borrowersfrom various sectors of the economy.

ICRA Lanka also rates rupee-denominated debt instruments issued by commercial banks,non-banking finance companies, financial institutions, and manufacturing and service companies,among others. It also rates structured obligations and sector-specific debt obligations. The otherservices offered include Corporate Governance Rating, Stakeholder Value and Governance Rating,Credit Risk Rating of Debt Mutual Funds, Rating of Claims Paying Ability of Insurance Companies,Project Finance Rating, and Line of Credit Rating.

ICRA Nepal Limited (ICRA Nepal), a subsidiary of ICRA, offers a wide range of Rating services inthe Nepalese market. ICRA Nepal rates rupee-denominated debt instruments issued by commercialbanks, financial institutions, non-banking finance companies, public sector undertakings, andmanufacturing and service companies, among others. Its services also include Issuer Rating and

Grading of Initial Public Offers. Further, ICRA Nepal is preparing to offer several other productsincluding Bank Loan/Line of Credit Rating and Rating of Claims Paying Ability of insurancecompanies, apart from Corporate Governance Rating, Stakeholder Value and Governance Rating,and Credit Risk Rating of Debt Mutual Funds.

Grading ServicesThe Grading Services offered by ICRA employ pioneering concepts and methodologies, and includeGrading of: Initial Public Offers (IPOs); Microfinance Institutions (MFIs); Construction Entities; RealEstate Developers and Projects; and Maritime Training Institutes. In IPO Grading, an ICRA-assignedIPO Grade represents a relative assessment of the fundamentals of the issue graded in relation to theuniverse of other listed equity securities in India. In MFI Grading, the focus of ICRAs grading exerciseis on evaluating the candidate institutions business and financial risks. The Grading of ConstructionEntities seeks to provide an independent opinion on the quality of performance of the entities graded.Similarly, the Grading of Real Estate Developers and Projects seeks to make property buyers aware of

the risks associated with real estate projects, and with the developers ability to deliver in accordancewith the terms agreed. In the education sector, ICRA offers the innovative service of Grading of MaritimeTraining Institutes in India. These apart, of late, ICRA has been offering the service of Grading ofRenewable Energy Service Companies (RESCOs) and System Integrators (SIs); Grading of ManagementEducation Institutes; Grading of Engineering Colleges/Universities; Grading of Fundamental Strength


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ICRA at a Glance

and Recovery Prospects; Assessment of Fundamental and Financial Strength of Real Estate Entities (REEs)& Real Estate Projects (REPs); and ICRA Corporate Responsibility and Sustainable-Business Grading.

Industry ResearchICRA has re-launched its industry research service, covering over 30 segments in the corporate andfinancial services sectors. Given ICRAs strong analytical capabilities across industries, the researchreports provide in-depth analysis of industry-specific issues, trends in demand-supply factors, thecompetitive landscape, and medium-to-long-term outlook. The research reports are tailored to meetthe research requirements of a wide range of participants, including banks, mutual funds, insurancecompanies, venture funds and corporates.

Equity Research ServiceThe ICRA Equity Research Service seeks to provide market participants with an assessment of thefundamental earning quality of specific companies and their current relative valuation as reflected bythe prevailing price of their equity shares. An ICRA Equity Research assessment, while not specifyingany target price for the shares evaluated, captures two key factorsfundamental earning qualityand relative valuationthat influence the price behaviour of equity shares of companies over themedium and long term. In assessing the relative valuation of a companys equity share, the same isbenchmarked against an appropriate peer set or index.

ICRA Equity Research reports are aimed at benefiting all categories of investors, including retailinvestors and especially those with a longer term investment horizon.

Consulting ServicesICRA Management Consulting Services Limited (IMaCS), a wholly-owned subsidiary ofICRA Limited, is a multi-line management consulting firm with a global operating footprint. IMaCSconsulting services span Policy Advisory, Strategy, Risk Management, Capacity Building, ProcessRe-engineering, and Transaction Advisory. IMaCS clientele includes Banks and Financial Service

Companies, Corporates, Financial Investors, Governments, Regulators, and Multilateral/BilateralDevelopment Agencies. Headquartered in India, IMaCS has consulting experience in over 40countries across South East Asia, South Asia, West Asia, Africa, Europe, and North America.

IMaCS offers Development Consulting services through its wholly-owned subsidiary, PragatiDevelopment Consulting Services Limited.

Software Development, Business Intelligence and Analytics and Engineering ServicesICRA Techno Analytics Limited (ICTEAS), a wholly-owned subsidiary of ICRA Limited, offers acomplete portfolio of Information Technology (IT) solutions to meet the dynamic needs of present-day businesses. The services range from the traditional development of client-server, web-centricand mobile applications to the generation of cutting-edge Business Intelligence applications andanalytics solutions. With years of experience in data-mining and predictive data modelling, ICTEASoffers various analytics solutions such as sales analytics and spend analytics. An in-depth knowledge

of various technology areas, coupled with its strengths in various verticals, enables ICTEAS toprovide end-to-end services of excellent quality. It uses a mix of onsite/offshore strategies to optimisebottomline benefits for its customers. ICTEAS also works in customization and implementation of theFinancial Modules of the Oracle E-Business Suite. Its services include process study, fitment analysis,customization implementation and post-implementation maintenance services. ICTEAS is a MicrosoftGold Partner and ISO 9001: 2008 and ISO/IEC 27001: 2005 certified.

The Engineering Division of ICTEAS offers multidisciplinary computer aided engineering designservices. The activities cover design and drawing in the mechanical, civil/structural, electrical andinstrumentation space. ICTEAS engineers and designers are well-versed in AutoCAD, MicroStation,PDS and Staad pro with experience in the Oil & Gas, Petrochemical and Power Sectors. The servicesrange from providing Engineering Design Services to CAD Vectorisation and Conversion Services.Over the years, ICTEAS has successfully deployed skilled resources to work for large engineeringconsulting companies both in the domestic and international market.

ICRA Sapphire Inc. (ICSAP), a wholly-owned subsidiary of ICTEAS, is based in and operates outof Connecticut, USA. It offers US clients a full array of leading edge Business Analytics and SoftwareDevelopment services backed by offshore teams, which work out of ICTEAS, Kolkata. This hybridengagement model of onsite and offshore teams allows for seamless project management, executionand rapid offshore scaling of teams while bringing down development costs.


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ICRA at a Glance

Based on the experience gained from working with the City of New York in the tragic days after theWorld Trade Center attacks, ICSAP developed for New York City the Unified Victim IdentificationSystem (UVIS), a Disaster Response Solution.

ICRA Global Capital, Inc. (IGCI) is a special purpose vehicle of ICTEAS. IGCI has been incorporatedto look after overseas investment activities. Currently, it holds majority stake in BPA Technologies, Inc.

BPA Technologies Inc. (BPA), a subsidiary of ICTEAS, is a California-based global businessconsulting and software technology services firm delivering Enterprise Content Management (ECM),Portal and Collaboration solutions, and Comprehensive QA Solutions. Other than in California, BPAhas development centres in Chennai and Visakhapatnam, besides a sales and customer service centrein Singapore.

BPA uses proven methods, industry expertise and best-in-class technology to address client-specificbusiness requirements. BPA combines its domain expertise and team strength to ensure its solutiondesigns and implementation services deliver maximum return for its clients technology investments.

With a global delivery model, BPA offers innovative and cost effective information management solutionsto its clients across various industries.

BPA Technologies Pte. Ltd., a wholly-owned subsidiary of BPA, acts as a service and support centreat Singapore, servicing clients onsite in this region.

BPA Technologies Private Limited, a wholly-owned subsidiary of BPA, acts as a state-of-the-artsoftware development offshore centre in India. BPA has also diversified into the QA segment, withits Quality Assurance team working with clients at every step of the software development process toensure that the quality of their software products meets and exceeds customer expectations.

Knowledge Process Outsourcing and Online SoftwareICRA Online Limited (ICRON) is a wholly-owned subsidiary of ICRA Limited. ICRON wasincorporated in January 1999 and has over the period since then established itself as an independentand credible source of authentic information, and software and outsourcing solutions provider.

ICRON caters for some of the biggest names in the financial services sector in India and abroad,which is a testimony to its product quality, commitment and credibility. ICRON has two StrategicBusiness Units (SBUs) with a list of reputed global and domestic clients:

The Knowledge Process Outsourcing Division (KPO Division); and The Information Services and Technology Solutions Division (MFI Division).

Encouraged by the emerging dynamics of the outsourcing business, ICRON diversified into the

Knowledge Process Outsourcing (KPO) business in April 2004, with focus on the Banking,Financial Services and Insurance (BFSI) vertical as well as other verticals like Retail, Healthcare andPharmaceuticals.

The KPO Division of ICRON offers Knowledge Process Outsourcing services that combine advancedanalytical abilities and deep domain expertise to deliver value by translating data and information intostructured business inputs. It provides financial and analytical services support to its clients in the areasof Data Extraction, Aggregation, Electronic Conversion of Financial Statements, Validation and Analysis,

Accounting and Finance, Research, Report Preparation and Analytics. The Division has attained ISO27001: 2005 certification through rigorous adherence to data security policies and practices.

The MFI Division serves the Mutual Fund Industry through Research, Analytics and Mutual FundRanking. Besides, it leverages its domain expertise to deliver high quality technology solutions, inthe form of products, to a large number of Banks, Mutual Funds, Financial Institutions, Third Party

Products Distributors, Insurance Companies, Investment Advisors, Portfolio Managers, Stock Brokers,Treasury Managers, and Academic Institutions, among others. The Company has developed severalinnovative products to meet the varied needs of its clients. The products are customised to meetspecific client requirements, enabling them in research, analysis and decision making while alsohelping them achieve automation in business operations.


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Chairman Emeritus

Mr. D.N. Ghosh Formerly, Chairman,State Bank of India

Board of Directors

Mr. P.K. Choudhury Chairman & Group CEODr. Uddesh Kohli Formerly, Chairman and

Managing Director, PowerFinance Corporation Limited

Prof. Deepak Nayyar Formerly, Vice Chancellor,University of Delhi

Mr. Piyush G. Mankad Formerly, Executive Director,Asian Development Bank

Mr. Amal Ganguli Formerly, Chairman and SeniorPartner, PricewaterhouseCoopers

Dr. Min Ye1 Managing Director and

Regional Head,Moodys Asia Pacific

Mr. Simon Richard Hastilow2 Managing Director andGlobal Head ofRelationship Management,Moodys Investors Service

Mr. Naresh Takkar Managing Director & CEO

Audit Committee Mr. Amal Ganguli, ChairmanDr. Uddesh KohliProf. Deepak NayyarDr. Min YeMr. Simon Richard Hastilow

Remuneration Committee Prof. Deepak Nayyar, Chairman

Dr. Uddesh KohliMr. Amal GanguliDr. Min Ye

Shareholders/Investors Dr. Uddesh Kohli, ChairmanGrievance Committee Mr. P.K. Choudhury

Mr. Naresh Takkar

Statutory Auditors Vipin Aggarwal & AssociatesChartered AccountantsE-4, Defence ColonyNew Delhi 110024

Solicitors Luthra & Luthra Law Offices

103, Ashoka EstateBarakhamba RoadNew Delhi 110001

FoxMandal LittleSolicitors & AdvocatesFM House, A-9, Sector 9Noida 201301

HSB PartnersAdvocatesCapitale, 9th Floor,No. 554/555, Anna SalaiTeynampet, Chennai 600018

Chief Financial Officer Mr. Vijay Wadhwa& Company Secretary

Bankers HDFC Bank LimitedSurya Kiran BuildingK.G. Marg, Connaught PlaceNew Delhi 110 001

The Royal Bank of Scotland N.V.Hansalaya Building15 Barakhamba RoadNew Delhi 110 001

State Bank of Hyderabad74 Janpath, New Delhi 110 001

Deutsche Bank AGGround Floor, Infinity TowerDLF, Phase IIGurgaon 122 002, Haryana

Kotak Mahindra Bank LimitedJMD Regent SquareMehrauli Gurgaon RoadOpposite Bristol HotelGurgaon 122 002, Haryana

Registrar and Link Intime India Private LimitedShare Transfer Agent 44 Community Centre, 2nd Floor,

Naraina Industrial Area, Phase I, NearPVR, Naraina, New Delhi 110 028

Registered Office 1105, Kailash Building,11th Floor26, Kasturba Gandhi MargNew Delhi 110 001

Corporate Office Building No. 8,2nd Floor, Tower ADLF Cyber City, Phase IIGurgaon 122 002, Haryana

1 Dr. Min Ye has been appointed Additional Director of ICRA Limited since May 24, 2013.2 Mr. Simon Richard Hastilow has been appointed Additional Director of ICRA Limited since May 24, 2013.


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ICRA Board of Directors

Professor DeepakNayyar, an eminenteconomist, is an IndependentDirector of ICRA. He is

Professor of Economics atJawaharlal Nehru University,New Delhi. Earlier, he hastaught at the University ofOxford, the University ofSussex, the Indian Instituteof Management, Calcutta,and the New School forSocial Research, New York.Professor Nayyar was ViceChancellor of the Universityof Delhi from 2000 to 2005.He has also served as ChiefEconomic Adviser to theGovernment of India andSecretary in the Ministry ofFinance. In the past, he wasa Director on the Boards ofState Trading Corporation ofIndia, the State Bank of India,Export-Import Bank of India,Maruti Udyog and SAIL. Atpresent, he is on the Board ofBirla Corporation Limited andof ONGC. He was educatedat St. Stephens College,University of Delhi. Thereafter,as a Rhodes Scholar, he wenton to study at Balliol College,University of Oxford, wherehe obtained a B. Phil anda D. Phil in Economics. Hehas received the V.K.R.V. Rao

Award for his contribution toresearch in Economics. He isan Honorary Fellow of BalliolCollege, Oxford. ProfessorNayyar served as Chairmanof the Board of Governorsof the UNU World Institutefor Development EconomicsResearch, Helsinki, a Memberof the Board of Directors ofthe Social Science ResearchCouncil in the UnitedStates, and Chairman ofthe Advisory Council for theDepartment of InternationalDevelopment, QueenElizabeth House, University ofOxford. He has also servedas a member of the NationalKnowledge Commission inIndia and Vice President ofthe International Associationof Universities, Paris.

Dr. Uddesh Kohli is anIndependent Director ofICRA. He is an Engineerfrom the Indian Institute

of Technology, Roorkee,and holds a Post-GraduateDiploma in Industrial

Administration from theManchester University, UK.He obtained his Ph.D. inEconomics from the DelhiSchool of Economics. Dr.Kohli has been Chairmanand Managing Director ofPower Finance CorporationLimited, and has worked withthe Planning Commission,Government of India,reaching the position of

Advisor (Additional Secretarylevel). He has carried outinternational assignments for

Asian Development Bank,United Nations IndustrialDevelopment Organization,United Nations DevelopmentProgramme and UnitedNations Office for ProjectServices. He is at presenta Director on the Boardsof ALSTOM India Limited,Lanco Infratech Limited,PTC India FinancialServices Limited, RK WindLimited, and NationalEnergy Trading andServices Limited. Dr. Kohlis

areas of expertise includedevelopment planning,finance, project formulation,appraisal, sustainabilityand monitoring, power/energy planning, CorporateSocial Responsibility trainingand human resourcedevelopment.

Mr. Piyush Gunwantrai Mankadis a retired civil servant, with adistinguished career of over fortyyears in the Indian Government. Born

in 1941, Mr. P.G. Mankad had hiscollege education in Delhi University,doing his Bachelors and MastersDegrees in Humanities, topping theUniversity. He later did a Diploma (withDistinction) in Development Studies atCambridge University, UK. He joinedthe prestigious Indian AdministrativeService in 1964, topping his batch.His major official postings includedController of Capital Issues, Ministryof Finance, Govt. of India; PrincipalFinance Secretary, Govt. of MadhyaPradesh; Secretary in the Ministriesof Industry, Govt. of India, Chairmanof the Foreign Investment PromotionBoard; Secretary, Informationand Broadcasting; and Finance/Revenue Secretary, Govt. of India. Hisoverseas assignments include thoseas Counsellor Economic, Embassy ofIndia, Tokyo, and Executive Director forIndia, Bhutan, Bangladesh, Laos andTajikistan and Board Member, AsianDevelopment Bank, Manila, whichwas his last official assignment till July2004. He has wide ranging experienceof diverse sectors, both economicand social, and his major areas ofexperience and expertise include publicadministration, finance, capital marketdevelopment and regulation, andindustrial and investment promotion. As

Controller of Capital Issues, GoI, from1985 to 1990, he was associated withmany pioneering steps to develop andmodernise the Indian Capital Markets,including the establishment of the firstRating Agency and the setting up ofthe Securities and Exchange Board ofIndia. He is currently on the Board ofseveral highly regarded companiesin the private sector as IndependentDirector, including from the Tata andMahindra Groups, in addition to ICRA,and is also on various GoverningBodies/ Trusts, including the ArmyGroup Insurance Fund; Society ofCapital Market Development andResearch; and the Lady ShriramCollege for Women, New Delhi. Healso serves, from time to time, onofficial committees, and is currentlythe Chairman of a Govt. of India TaskForce on Public Sector Enterprises.

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Mr. Pranab KumarChoudhuryis theChairman of ICRA Limited& Chief Executive Officer

of Group ICRA. He is alsoChairman of ICRA OnlineLimited, ICRA Lanka Limited,ICRA Nepal Limited, andPeerless Financial ServicesLimited. Besides, he isPresident Commissionerof PT ICRA Indonesia anda Director on the Boardsof ICRA ManagementConsulting Services Limited,ICRA Techno AnalyticsLimited, BPA TechnologiesInc. and ICRA SapphireInc. He is also a Directoron the Boards of PeerlessSecurities Limited and ThePeerless General Finance& Investment CompanyLimited. Mr. Choudhuryholds a Bachelors anda Masters Degree inCommerce from theUniversity of Calcutta. Heis a Chartered Accountantfrom The Institute ofChartered Accountantsof India and also holds aPost-Graduate Diplomain Advanced FinancialManagement fromthe Maastricht Schoolof Management, The

Netherlands. Besides, Mr.Choudhury is a C.A.I.B. fromThe Institute of Bankers,London, and a C.A.I.I.B.from the Indian Institute ofBankers. With a professionalexperience of over 40 yearsnow, Mr. Choudhury has,prior to joining ICRA, workedin the manufacturing,commercial banking,development banking, andmerchant banking sectors.


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ICRA Board of Directors

Mr. Amal Ganguli is anIndependent Director of ICRA.He is a Fellow of the Institute ofChartered Accountants in England

& Wales as well as The Institute ofChartered Accountants of India.He did his training in London, andworked there with Peat MarwickMitchell & Co. Mr. Ganguli joinedPrice Waterhouse in India in1964, became a Partner of thefirm in 1969 and from 1996 tillthe time of his retirement, wasthe Chairman and Senior Partnerof PricewaterhouseCoopers inIndia. He has been a memberof several study groups of TheInstitute of Chartered Accountantsof India and has also worked as anindependent short-term consultant

to the World Bank after hisretirement. Mr. Ganguli is on theBoards of a number of companiesincluding HCL TechnologiesLimited, New Delhi TelevisionLimited, Century Textiles andIndustries Limited, AVTEC Limited,Maruti Suzuki India Limited andTata Communications Limited.

14

Dr. Min Ye is aNon-Independent Director of ICRA1.He is the Managing Director andthe Regional Head of Moodys

Asia Pacific. He is responsiblefor formulating business growthinitiatives, budgeting and planning,managing Moodys offices andaffiliate relations, and monitoringthe regulatory environment in the

Asia Pacific region. Earlier, he wasthe Managing Director and theCountry Manager for MoodysChina, as well as the ChiefExecutive Officer of China ChengxinInternational Credit Rating Co. Ltd.,a Moodys affiliate in China. Dr.Min Ye, who joined Moodys as aSenior Analyst and Vice Presidentin 1994, has also worked as the

Managing Director of the StructuredFinance Group for Asia Pacific (ex-Japan) in Hong Kong.

Dr. Min Ye has a BE and an MEin Electrical Engineering from theTsinghua University in Beijing. Healso has a Ph.D. in Electrical andComputer Engineering from theCarnegie Mellon University, USA.

Mr. Simon Richard Hastilowis a Non-Independent Directorof ICRA2. He is a ManagingDirector and the Global Head

of Relationship Management ofMoodys Investors Service. Mr.Simon Hastilow graduated fromCity of London Polytechnic inLondon. He worked for 10 yearsin London-based marketing andadvertising companies, and thenfor over 10 years at ThomsonReuters in various marketing, salesand business management roles.He joined Moodys in 2011 in hiscurrent role.

1 Dr. Min Ye has been appointed Additional Director of ICRA Limited since May 24, 2013.2 Mr. Simon Richard Hastilow has been appointed Additional Director of ICRA Limited since May 24, 2013.


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ICRA Board of Directors Senior Management

Mr. L. ShivakumarSenior Group Vice-President

Mr. Vivek MathurSenior Group Vice-President

Mr. Jayanta ChatterjeeSenior Group Vice-President

Mr. Anjan Deb GhoshSenior Group Vice-President &

Chief Rating Officer

Mr. Subrata RaySenior Group Vice-President

Mr. Vijay WadhwaChief Financial Officer &

Company Secretary

Mr. Naresh Takkaris the ManagingDirector & CEO of ICRA. Prior to holdingthis position he was Joint ManagingDirector & Chief Rating Officer of ICRA.

He is also a Director of ICRA TechnoAnalytics Limited, ICRA Online Limited,ICRA Lanka Limited and of ICRA NepalLimited. Besides, he is the Vice-Chairmanof Association of Credit Rating Agenciesin Asia (ACRAA). He joined ICRA asan analyst in 1991. Before joiningICRA, he was with Tata ConsultancyServices for three years in the SystemConsulting Division. Mr. Takkar is aChartered Accountant from The Instituteof Chartered Accountants of India andholds a Bachelors Degree in Commercefrom the University of Delhi.


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Directors Report

Particulars Standalone Consolidated

2011-12 2012-13 2011-12 2012-13(Rs. crore) (Rs. crore) (Rs. crore) (Rs. crore)

Revenue from Operations 139.36 148.59 207.46 251.41

Other Income 19.74 16.24 21.29 17.91

Total Revenue 159.10 164.83 228.75 269.32

Total Expenditure (83.37)# (91.95)* (149.58)# (197.28)*

Profit before Tax 75.73 72.88 79.17 72.04Tax Expense (24.83) (12.50) (25.31) (13.23)

Profit before Minority Interest 50.90 60.38 53.86 58.81

Minority Interest 0.15 0.35

Profit after Tax 50.90 60.38 54.01 59.16

Balance brought Forward 76.32 98.89 86.94 112.33

Profit Available for Appropriation 127.22 159.27 140.95 171.49

APPROPRIATIONS

Proposed Dividend 20.00 22.00 20.00 22.00

Corporate Tax on Proposed Dividend 3.24 3.74 3.24 3.74

Transfer to Capital Redemption Reserve 0.30

Transfer to General Reserve 5.09 6.04 5.09 6.04Adjustments relating to erstwhileAxiom Technologies Ltd. (0.01)

Balance Carried to Balance Sheet 98.89 127.49 112.33 139.71

127.22 159.27 140.95 171.49

Cash EPS is computed after considering Depreciation and Amortisation of Deferred Employees Compensation.

To The Members,ICRA Limited

Your Directors have pleasure in presenting the 22nd Annual Report of your Company along with theAudited Financial Statements for the year ended March 31, 2013.

Financial Performance

During its 22nd year of operations, your Company earned a Net Profit of Rs. 60.38 crore as againstRs. 50.90 crore during the previous year. Your Companys Earning per Share and Cash Earning per

Share

for the year ended March 31, 2013 were Rs. 60.38 and Rs. 67.30, respectively, as againstRs. 50.90 and Rs. 65.72, respectively, in the previous year. The financial results of your Company(standalone and consolidated) for the year ended March 31, 2013 are presented in the following table.

#Includes Rs. 12.92 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock OptionScheme of your Company.*Includes Rs. 4.81 crore towards Amortisation of Deferred Employees Compensation for Options granted under the Employees Stock Option Schemeof your Company.


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Review of Operations

Rating Services

Market OverviewThe fiscal year 2012-13 remained challenging from a macroeconomic perspective. Although coreinflation moderated appreciably, retail inflation remained stubbornly high, limiting the space availablefor the Reserve Bank of India (RBI) to ease the policy repo rate in response to the slowing of economicgrowth. While the announcement of various reforms from September 2012 onwards led to animprovement in sentiments, new project announcements and capacity addition remained elusive.

An unfavourable monsoon weakened agricultural growth and incomes in the rural sector during theyear, while relatively high retail inflation dampened growth of disposable income for other households.

As a result, consumption demand moderated for various categories of products. Moreover, theinvestment cycle showed no signs of revival, given the persistence of issues related to regulatoryapprovals, land acquisition, availability of critical inputs, and over-leveraged balance sheets.

The domestic systemic liquidity deficit breached the RBIs comfort zone for much of the secondhalf (H2) of 2012-13 despite the reduction of 75 basis points (bps) in the cash reserve ratio (CRR)since September 2012 as deposit accretion lagged credit growth at the absolute level in H2, 2012-13. Tight liquidity restrained the pace of transmission of monetary easing to lower interest rates,particularly in the fourth quarter (Q4) of the year.

Merchandise exports contracted during the year, reflecting weak demand from advanced economiesand persisting infrastructural deficits in India, which offset the competitiveness gains arising out of aweaker exchange rate of the rupee relative to major currencies. At the same time, relatively inelasticdemand for crude oil and gold kept merchandise imports high. A weaker rupee in conjunction withthe substantial volume of short-term debt due for redemption created problems for corporate entities,especially those with large foreign currency borrowings.

While the primary equity market revived somewhat in H2, 2012-13, domestic bond issuancesdisplayed over 30% growth during the year driven by higher issuances by non-banking financecompanies (NBFCs) and corporates. Growth in bank credit dipped from 17% in 2011-12 to around15% in 2012-13. Continuing the trend set in 2011-12, a significant proportion of the incrementalbank credit extended to industry in 2012-13 was absorbed by the power sector (largely to offset the

substantial accumulated losses) and basic metals & metal products (partly on account of the higherworking capital requirement against the backdrop of elevated commodity prices).

On the regulatory side, recently, Government of India (GoI) has made concerted efforts to arrestfiscal slippages and also announced some bold policy measures with a view to stimulating economicgrowth. Even as the RBIs policy stance continues to tilt towards measures addressing growthconcerns, the forward-looking guidance it has provided cites high retail inflation and the widecurrent account deficit to emphasise that headroom for further monetary easing remains limited.Nevertheless, transmission of the recent and anticipated repo rate cuts would ease interest rates toan extent, providing a limited boost to interest-rate sensitive sectors and consumption sentiments.

Additionally, a normal monsoon would help ease food inflation and revive consumer demand,particularly from the rural sector. Moreover, the steps initiated by GoI to expedite clearances through

the Cabinet Committee on Investment and address sector-specific issues (for instance, in power) arelikely to help revive investment activity over the course of the current fiscal year.

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Segment 2011-12 2012-13 Growth (%)(Rs. crore) (Rs. crore)

Basel II 66.38 64.94 -2%Non-Basel II 72.98 83.65 15%

Composition of Rating Revenues

Basel II

Non-Basel II

2011-12 2012-13

Basel II48%

Non-Basel II52%

Basel II44%

Non-Basel II56%

Directors Report

Rating Services Review

Segment 2011-12 2012-13 Growth (%)(Rs. crore) (Rs. crore)

Corporate Sector 93.05 92.12 -1%Financial Sector 35.72 40.85 14%Structured Finance 6.30 6.21 -1%Public Finance 0.88 1.18 34%

Other Ratings 3.41 8.23 141%Total 139.36 148.59 7%

Ratings: Segment-wise Revenue Composition

2012-132011-12

26%

67%

4%

1%

2%

27%62%

4%

1%6%

Corporate Sector

Financial Sector

Structured Finance

Public Finance

Other Ratings


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Corporate SectorThe market for bank loan ratings continued to expand in 2012-13, although the ticket size ofindividual mandates remained small. Also, the market for bank loans was affected by sluggish growthin corporate credit as well as by the subdued investment climate in the country which saw very fewlarge projects achieving financial closure. The challenging macroeconomic environment along withthe highly leveraged balance sheet of a large number of corporates, especially in the infrastructuresector, also constrained pick-up in fresh investment activity.

The volume of corporate debt issuance through the capital market continued to rise in 2012-13 asbetter-rated entities (including NBFCs and corporate entities) raised funds via bonds at finer rates,given the high base rate of banks. Also, there was some progress in rating credit enhanced bondswith partial guarantee provided by India Infrastructure Finance Company Limited (IIFCL). The takeoutfinancing scheme of IIFCL also saw a few special purpose vehicles (SPVs) refinance loans taken fromthe banking system.

The market for grading of initial public offerings (IPOs) remained sluggish during 2012-13. Growth inthis segment hinges on revival in market sentiments and the consequent increase in fund-raising via IPOs.

Your Company has been making progress in scaling up the business activity of rating small andmedium enterprises (SMEs). These ratings are widely used by banks as an input for the pricing ofcredit to the SMEs concerned. The total number of SMEs rated by ICRA picked up well during the yearunder review. Given the large number of SMEs in the country and the valuable experience gained sofar, your Company hopes to step up the volumes in this segment during the current year.

Financial SectorDuring the year, your Company benefited from the increase in issuances of commercial paper andcorporate bonds, which in turn drew support from the greater investor appetite for such products andthe higher limits set for investments by foreign institutional investors (FIIs) in corporate bonds. Howevercapital debt issuances by banks stagnated in 2012-13, with overall credit off-take being weaker andsome equity infusion taking place ahead of Basel III. Certificate of deposit (CD) issuances by banks alsodeclined during the year with most public sector banks paring their bulk deposits on regulatory prompt.

As for NBFCs, most of them continued to scale up operations in 2012-13 even as the operatingenvironment remained challenging. The year also saw some NBFCs take the public debt issuance routeto raise funds for onward lending. Tax-free bond issuances by strong public sector entities howeverremained weak during 2012-13 with investor interest for these long-tenure issues remaining tepid as

banks continued to offer attractive rates on deposits. The overall trends in the NBFC sector continuedto benefit your Company during the year under review, given its strong presence in this sector.

Your Company continued to further strengthen its position in the rating of debt mutual funds during2012-13, adding new asset management companies (AMCs) as clients, besides rating more debtschemes of its existing AMC-clients.

Looking ahead, rating activity in the financial sector is expected to grow, given GoIs attempts to putgrowth back of track and the likelihood of a decline in interest rates in the economy, both of whichshould encourage investment and consumption demand.

Structured FinanceDuring 2012-13, issuance volumes in the rated bilateral loan assignment/securitisation marketreduced by around 20% over the previous fiscal to around Rs. 29,000 crore. The dip in activityfollowed mainly from the H1, 2012-13-issued RBI guidelines disallowing originators from providing

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credit enhancement in the bilateral assignment of loan poolsthe popular mode of doing transactionstill 2011-12. Further, some of the requirements introduced by the RBI guidelines left originators witha smaller portfolio eligible for securitisation. On the positive side, the year under review saw the firstinstance of pass-through certificates, the instruments issued in securitisation transactions, being listedon the stock exchangea positive step towards improving secondary market trading.

Even as the opportunity for rating of bilateral assignment transactions ceased, your Companydeveloped an alternative productestimate of credit loss in the loan poolto serve the segment.This was received well by market participants. Also, your Company rated a number of customisedstructured obligationsguarantee-backed non-convertible debentures (NCDs)/commercial paper, put

option-backed NCDs, and annuity-backed structured NCDsduring the year under review. It is alsoexpected that the new tax treatment introduced by the Union Budget for 2013-14 would open thepath for mutual funds to invest in securitisation transactions (which would have to be rated), althoughthe same could be a negative for banks.

With bank finance to NBFCs no longer qualifying as priority sector lending (PSL), investing insecuritisation transactionswith the underlying assets being eligible loan receivablesremainsthe key route left for banks to meet their shortfall in PSL targets. Thus, going forward, the extent ofshortfall in PSL targets in the banking system and the availability of eligible assets with sellers areexpected to be the key factors influencing securitisation issuance volumes. Nevertheless, in thisregard, the tax treatment could lower banks motivation to invest in securitised paper.

Economic and Industry Research

Economic ResearchYour Company has been engaged in economic research since its inception, investing considerabletime and resources into the activity. The purpose has been to analyse contemporary developmentsthat characterise the money and finance world, and to offer a framework for the explanation ofpolicy choices, initiatives and outcomes. The ICRA Bulletin: Money & Finance (Money & Finance) is aproduct of this research. This periodical is disseminated among a wide variety of readers, including,among others, students, academicians, policymakers, investors and economists across the country.

Apart from Money & Finance, your Company regularly comes out with impact-assessment studies,research notes and trend analyses, covering several topics including, but not limited to, inflation,economic performance, the Union Budget, the index of industrial production, and policy assessment

and impact.

Industry ResearchYour Company has re-launched industry research service, covering over 30 segments in the corporateand financial services sectors. Given your Companys strong analytical capabilities across industries, theresearch reports provide in-depth analysis of industry-specific issues, trends in demand-supply factors,the competitive landscape, and medium-to-long-term outlook. The research reports are tailored to meetthe research requirements of a wide range of participants, including banks, mutual funds, insurancecompanies, venture funds and corporates. Your Company would continue to strengthen its offeringsunder this service, harnessing its extensive knowledge base and research capabilities.

During the year under review, your Company continued to bring out research notes, analysing the

impact of various events on the sectors concerned from the credit perspective. Besides, your Companycontinued to hold seminars and teleconferences for market participants at regular intervals.

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Franchise Development

Your Company continues to make every effort to enhance its visibility and reinforce its brand strengththrough such activities that are aimed at promoting investor and market awareness, bridging theinformation gap, and recognising excellence.

During the year, your Company held several seminars, some along with banks, on Bank LoanRatings under Basel II Guidelines, Rating of Small and Medium Enterprises, and other ICRA productsin several Tier II cities as part of its outreach and education initiative. Besides, joint seminars withMoodys Investors Service were conducted, all of which were well attended and appreciated. Further,several teleconferences, covering most of the key sectors, were organised, with these enabling moreefficient and faster dissemination of ICRAs credit outlook among a wider set of market participants.These apart, regular media releases were made on issues of interest to the investing public.

On recognising excellence, your Company continues to power the Financial Advisor Awards alongwith CNBC-TV18, the Financial Leadership Awards with Bloomberg UTV, and the India Pride Awards,an initiative to recognise the superior performing public sector entities, with the Dainik Bhaskar group.

All these Awards have gained considerable popularity, as is evident from the level of participationwitnessed over the years. This year, your Company has also powered Dainik Bhaskars inauguralJaipur Real Estate Awards.

Subsidiary Companies

During the year, ICRA Nepal Limited (ICRA Nepal), a subsidiary of your Company, commenced creditrating services in Nepal following the grant of rating licence by the Securities Board of Nepal. YourCompany holds 51% of the share capital in ICRA Nepal, the balance 49% being held by certainreputable Nepal-based institutions and professionals.

During 2012-13, ICRA Techno Analytics Limited (ICTEAS), a wholly owned subsidiary of yourCompany, through its subsidiary ICRA Global Capital Inc., acquired a majority stake of 75.1% inBPA Technologies Inc. (BPA), a California-based global business consulting and software technologyservices firm. Other than in California, BPA has development centres in Chennai and Visakhapatnam,besides a sales and customer service centre in Singapore. Focused on enterprise contentmanagement, enterprise portal and collaboration, BPA offers strategy consulting, implementation andapplication management services in its areas of specialisation.

The acquisition of BPA is structured in three tranches over a period of three years. The valuation ofBPA would be performance-linked and is estimated at US$16 million.

Your Company is in compliance with all the conditions stipulated by the Ministry of Corporate Affairs,Government of India, for availing itself of the general exemption under Section 212 (8) of theCompanies Act, 1956, from annexing to the Balance Sheet of your Company, the Audited Statementsof Account together with the Directors Reports and the Auditors Reports for the year 2012-13 of thefollowing subsidiary companies:

1. ICRA Management Consulting Services Limited1.1. IMaCS Virtus Global Partners Inc.1.2. Pragati Development Consulting Services Limited

2. ICRA Techno Analytics Limited

2.1. ICRA Sapphire Inc.2.2. ICRA Global Capital Inc.

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Employees Stock Option Scheme (ESOS)

Your Company has implemented the Employee Stock Option Scheme 2006 (the Scheme) inaccordance with the Securities and Exchange Board of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999, and in conformity with the resolutions passedby the Shareholders at the Annual General Meetings of the Company held on June 12, 2006, July29, 2008, and August 12, 2011. Pursuant to the resolution passed by the Shareholders at the AnnualGeneral Meeting held on June 12, 2006 for the grant of Options, 9,06,000 Equity Shares amountingto 9.06% of the Equity Share Capital of your Company have been issued to the ICRA EmployeesWelfare Trust for grant of Options to the eligible Optionees. Accordingly, the Stock Options have

been granted to the eligible Optionees from the said pool of 9,06,000 Equity Shares in two tranchesso far. The first tranche was granted during 2006-07 and the second during 2010-11. The details ofthe Stock Options granted under the Scheme are annexed to the Directors Report (Annexure I), andso is the Certificate from the Statutory Auditors of your Company certifying that the scheme has beenimplemented in accordance with the Securities and Exchange Board of India (Employee Stock OptionScheme and Employee Stock Purchase Scheme) Guidelines, 1999, and in accordance with theresolutions passed in the said Annual General Meetings of the Company (Annexure II). The Schemeis administered by the ESOS Compensation Committee of the Board of your Company and the ICRAEmployees Welfare Trust.

Particulars of Employees

The information on employees receiving remuneration of Rs. 60 lakh per financial year or Rs. 5 lakhper month, or more, is required to be given as annexure to the Directors Report under Section 217(2A) of the Companies Act, 1956, and the Companies (Particulars of Employees) Amendment Rules,2011. However, in terms of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Directors Reportis being sent to all Shareholders of your Company without this annexure. Any Shareholder interestedin obtaining a copy of the said annexure may write to the Company Secretary at the Registered Officeof your Company.

Corporate Governance

The report of the Board of Directors of your Company on Corporate Governance is presented asa separate section (Annexure III) titled Corporate Governance Report, which forms a part of the

Annual Report. The Certificate of the Statutory Auditors of your Company regarding compliance withthe Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement with thestock exchanges concerned is annexed to the Directors Report.

Management Discussion & Analysis

The Management Discussion and Analysis is annexed to the Directors Report (Annexure IV).

Insider Trading Regulations

Based on the requirements under the Securities and Exchange Board of India (Prohibition of InsiderTrading) Regulations, 1992, as amended from time to time, the Code of Conduct for prevention ofinsider trading is in force in your Company.

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(ii) the Directors have selected such accounting policies and applied them consistently and madejudgements and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profit of theCompany for that year;

(iii) the Directors have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956, for safeguarding theassets of the Company and for preventing and detecting frauds and other irregularities; and

(iv) the Directors have prepared the Annual Accounts on a going concern basis.

Auditors

Messers Vipin Aggarwal & Associates, Chartered Accountants, Statutory Auditors of your Company,hold office until the conclusion of the forthcoming Annual General Meeting and are eligible forreappointment. They have confirmed their eligibility for reappointment under the provisions of Section224 (1B) of the Companies Act, 1956.

The Notes to Accounts referred to in the Auditors Report are self explanatory and do not call for anyfurther comments.

Transfer to Reserves

Your Company proposes to transfer Rs. 6.04 crore (10% of the Net Profit for the year) to the GeneralReserve. An amount of Rs. 127.49 crore is proposed to be retained in the Statement of Profit & Loss.

Dividend

The Board of Directors recommends for approval of the Shareholders at the forthcoming AnnualGeneral Meeting, payment of dividend of Rs. 22 per Equity Share for the financial year ended March31, 2013. If the Shareholders approve the dividend at the forthcoming Annual General Meeting, thedividend shall be paid to: (i) all those Members whose names appear in the Register of Members ason July 29, 2013; and (ii) all those Members whose names appear on that date as beneficial ownersas furnished by National Securities Depository Limited and Central Depository Services (India) Limited.

Acknowledgements

Your Directors acknowledge the cooperation and assistance received from various institutions,Government agencies, Shareholders and professionals from different disciplines.

Your Directors also wish to place on record their appreciation of the contribution made by themembers of staff of your Company.

For and on behalf of the Board of Directors

Place : New Delhi (Pranab Kumar Choudhury)

Date : May 24, 2013 Chairman & Group CEO

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Annexures to the Directors Report

Disclosure in compliance with Clause 12 of the Securities and ExchangeBoard of India (Employee Stock Option Scheme and Employee StockPurchase Scheme) Guidelines, 1999

Description Tranche 1 Tranche 2(As on (As on

March 31, 2013) March 31,2013)

(a) Options Granted during the year

(Tranche 1 Granted on March 24, 2007: 6,15,763)(Tranche 2 Granted on November 9, 2010: 2,72,500) Nil Nil

(b) The Pricing Formula IPO Issue Price IPO Issue Price

(c) Options Vested 5,44,859 1,75,126

(d) Options Exercised 4,42,713 1,06,927

(e) Total Number of Shares arising as a result of 4,42,713 equity 1,06,927 equityExercise of Options shares of shares of

Rs. 10/- each Rs. 10/- each

(f) Options Lapsed 73,853 27,231

(g) Variation of Terms of Options Nil Nil

(h) Money Realised by Exercise of Options Rs. 14,60,95,290 Rs. 3,52,85,910

(i) Total Number of Options in Force 99,197 1,38,342

(j) Employee-wise details of Options granted under Tranche 2

(i) The options that vested/will vest annually to Senior Managerial Personnel of your Company are as under:

Name of Employee Designation November November November

9, 2011 9, 2012 9, 2013

Mr. Pranab KumarChoudhury Chairman & Group CEO 4,800 3,600 3,600

Mr. Naresh Takkar Managing Director & CEO 4,800 3,600 3,600

Mr. L. Shivakumar Senior Group Vice-President 3,240 2,430 2,430

Mr. Vivek Mathur Senior Group Vice-President 3,240 2,430 2,430

Mr. Anjan Deb Ghosh Senior Group Vice-President & 3,240 2,430 2,430Chief Rating Officer

Mr. Jayanta Chatterjee Senior Group Vice-President 3,240 2,430 2,430Mr. Subrata Ray Senior Group Vice-President 2,988 2,241 2,241

Mr. Vijay Wadhwa CFO & Co. Secretary 3,240 2,430 2,430

Mr. Rohit DattatrayInamdar Senior Vice-President 4,976 3,732 3,732

Mr. K. Ravichandran Senior Vice-President 2,700 2,025 2,025

Mr. Kalpesh Gada Senior Vice-President 2,700 2,025 2,025

Ms. Vibha Batra Senior Vice-President 2,700 2,025 2,025

Mr. Karthik Srinivasan Senior Vice-President 2,700 2,025 2,025

Mr. Jayanta Roy Senior Vice-President 2,249 1,688 1,688

Mr. SabyasachiMajumdar Senior Vice-President 2,100 1,575 1,575

(ii) any other employee who receives a grant in any one year of options amounting to5% or more of Option granted during the year None

(iii) identified employees who were granted option, during any one year, equal to orexceeding 1% of the issued capital (excluding outstanding warrants and conversions)of the Company at the time of grant None

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(k) Diluted Earning Per Share (EPS) pursuant to issue of shareson exercise of Option calculated in accordance with

Accounting Standards (AS)-20

(l) Where the Company has calculated the employeecompensation cost using the intrinsic value of the StockOptions, the difference between the employee compensationcost so computed and the employee compensation cost thatshall have been recognised if it had used the fair value of

the Options. The impact of this difference on profits andon Earning Per Share of the Company

(m) Weighted average exercise price of the Options and Weighted average fair values of Options on thegrant date are as under:-

Stock option Exercise Price Fair Values of Closing market pricegranted on (in Rs.) options (in Rs.) at BSE/NSE (in Rs.)

Face value Rs. 10

March 24, 2007 330.00 138.00 Shares of ICRA Limitedwere not listed on grant date

November 9, 2010 330.00 1,153.00 Rs. 1,423.85 onNovember 8, 2010 (NSE)

(n) Black Scholes Option Valuation method has been adopted for estimating the fair value of the Options.The Fair Value of the Stock Options has been calculated assuming the following:

Stock Option granted on March 24, 2007(1) Risk free interest rate: 7.7-7.8%(2) Expected life: 3-5 years(3) Expected volatility: 47.6%(4) Expected dividends: Rs. 5 per share per annum(5) The shares were not listed at the time of grant of Options. However, the market price of each share as on

the Grant Date was taken as Rs. 330 (i.e. the IPO Issue Price)

Stock Option granted on November 9, 2010(1) Risk free interest rate: 7.32-7.78%(2) Expected life: 3-5 years(3) Expected volatility: 58.4%(4) Expected dividends: Rs. 13 per share per annum

(5) Price of the underlying share in market at the time of option grant: Rs. 1,423.85 (NSE)

Annexures to the Directors Report

In our opinion and according to the information and explanations given to us, we hereby certifythat ICRA Limited (the Company) has implemented Employees Stock Option Scheme, 2006 (theScheme) in accordance with the Securities and Exchange Board of India (Employee Stock OptionScheme and Employee Stock Purchase Scheme) Guidelines, 1999 and in conformity with theresolutions passed by the shareholders in the Annual General Meetings of the Company held on June12, 2006, July 29, 2008 and August 12, 2011.

For Vipin Aggarwal & AssociatesChartered Accountants

(Registration No. 014454N)

Place : New Delhi (Vipin Aggarwal)Date : May 24, 2013 Membership No. 016544

Auditors Certificate

Rs. 60.38

Had the Company followed fair value methodfor accounting the Stock Option compensationexpense the amortisation would have beenhigher by Rs. 25.99 lakh. Consequently profitafter tax would have been lower by Rs. 17.56

lakh and the basic and diluted EPS of theCompany would have been Rs. 60.21

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Corporate Governance Report

A. Companys Philosophy on Corporate Governance

Good governance encompasses conduct of the Companys business in an ethical, transparent, fairand equitable manner with due regard to the interests of various stakeholders, and exercising propercontrol over the Companys assets and transactions.

B. Board of Directors

(i) Board Membership Criteria

The Members of the Board of Directors of your Company are expected to possess the requiredexpertise, skill, and experience to effectively manage and direct your Company so that it can attainits organisational goals. They are expected to be persons with vision, leadership qualities, a strategicbent of mind, proven competence, and integrity.

Each Member of the Board of Directors of your Company is expected to ensure that his/her personalinterest does not run in conflict with your Companys interests. Moreover, each Member is expected touse his/her professional judgement to maintain both the substance and appearance of independenceand objectivity.

(ii) Composition of the Board

The Board of Directors of your Company has an optimum combination of Executive and Non-Executive Directors so as to have a balanced structure. The Board has eight Directors, two of whomare Executive Directors. Of the six Non-Executive Directors, four are Independent Directors. TheChairman of the Board is an Executive Director. The number of Independent Directors is half of thetotal numbers of Directors. The number of Non-Executive Directors is more than 50% of the totalnumber of Directors. All Directors, except the Chairman & Group CEO and the Managing Director &CEO, are liable to retire by rotation.

Minimum

Particulars Requirement as perNo. of Directors % of Total Directors Clause 49(%)

Non-Executive Directors 6 75 50

Executive Directors 2 25 N.A.

Total 8 100

Independent Directors 4 50 50

Non-Independent Directors 4 50 N.A.

Total 8 100

N.A.: Not Applicable

Composition of the Board

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None of the Directors on the Board of your Company is a Member of more than 10 committees or chairmanof more than five committees (in compliance with Clause 49 of the Listing Agreement), considering all thecompanies in which they are Directors. One of the Independent Directors of your Company is a Director onthe Board of Directors of ICRA Techno Analytics Limited (ICTEAS), a material non-listed Indian subsidiarycompany of your Company.

The composition of the Board along with the other directorships held by each of the Directors is set out below:

Name of Position Relationship Directorship No. of Board No. of BoardDirector1 with Other in Other Committee(s) Committee(s)

Directors Companies2 of which she/he of which she/heis a Member3 is a Chairman3

Mr. Dhruba Chairman Emeritus* NoneNarayan Ghosh

Mr. Pranab Kumar Chairman**Choudhury Executive Non-Independent

Director None 11 5 None

Mr. Naresh Takkar Executive

Non-Independent Director None 4 2 1

Dr. Uddesh Kohli Non-ExecutiveIndependent Director None 6 5 5

Prof. Deepak Nayyar Non-ExecutiveIndependent Director None 2 1 None

Mr. Piyush Non-ExecutiveGunwantrai Mankad Independent Director None 9 7 2

Mr. Amal Ganguli Non-ExecutiveIndependent Director None 13 5 5

Ms. Jennifer Non-ExecutiveAnn Elliott4 Non-Independent Director None 3 None None

Mr. Frederic Walter Non-ExecutiveJacques Drevon5 Non-Independent Director None 6 None None

Dr. Min Ye6 Non-ExecutiveNon-Independent Director None 16 1 None

Mr. Simon Richard Non-ExecutiveHastilow7 Non-Independent Director None None 1 None

* Mr. Dhruba Narayan Ghosh resigned as Chairman and Independent Director of the Company with effect from February 1, 2013. Mr. Ghosh holds the position of Chairman Emeritu s, ICRALimited, from the said date.** Mr. Pranab Kumar Choudhury has been elevated from Vice-Chairman & Group CEO to Chairman & Group CEO with effect from February 1, 2013.1 Except Mr. Pranab Kumar Choudhury and Mr. Naresh Takkar, none of the Directors of your Company was holding any shares of your Company as on March 31, 2013.2 Including Private Companies and Foreign Companies.3 Includes membership/chairmanship only of the Audit Committee(s) and Shareholders/Investors Grievance Committee(s) in all companies (Public Limited Companies and Private LimitedCompanies), including ICRA Limited.4 Ms. Jennifer Ann Elliott has ceased to be Director following her resignation from the Board with effect from May 24, 2013.5 Mr. Frederic Walter Jacques Drevon has ceased to be Director following his resignation from the Board with effect from May 24, 2013.6 Dr. Min Ye has been appointed Additional Director of your Company at the Board Meeting held on May 24, 2013.7 Mr. Simon Richard Hastilow has been appointed Additional Director of your Company at the Board Meeting held on May 24, 2013.


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Name of Director Directorship in Other Companies

Mr. Pranab Kumar Choudhury ICRA Online Limited

ICRA Management Consulting Services Limited

ICRA Techno Analytics Limited

Peerless Securities Limited

ICRA Sapphire Inc.

PT ICRA Indonesia

The Peerless General Finance & Investment Company Limited

ICRA Lanka Limited

ICRA Nepal Limited BPA Technologies Inc.

Peerless Financial Services Limited

Mr. Naresh Takkar ICRA Techno Analytics Limited

ICRA Online Limited

ICRA Nepal Limited

ICRA Lanka Limited

Dr. Uddesh Kohli ALSTOM India Limited

Lanco Infratech Limited

PTC India Financial Services Limited

Powerwind Limited

National Energy Trading and Services Limited

ICRA Techno Analytics Limited

Prof. Deepak Nayyar Birla Corporation Limited

Oil and Natural Gas Corporation Limited

Mr. Piyush Gunwantrai Mankad Tata South East Asia Limited

Tata International Limited

Tata Elxsi Limited

DSP BlackRock Investment Managers Private Limited

Noida Toll Bridge Company Limited

HeidelbergCement India Limited

The Tata Power Company Limited

Mahindra and Mahindra Financial Services Limited

Hindustan Media Ventures Limited

Mr. Amal Ganguli ML Infomap Private Limited

HCL Technologies Limited

New Delhi Television Limited

Century Textile and Industries Limited

AVTEC Limited

Hughes Communications India Limited

Maruti Suzuki India Limited

Tata Communications Limited

Aricent Technologies (Holdings) Limited

Laurus Labs Private Limited

Tata Teleservices (Maharashtra) Limited

Triveni Turbine Limited Mangalam Cement Limited


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Name of Director Directorship in Other Companies

Ms. Jennifer Ann Elliott1 Moodys Investors Service (Beijing) Limited

PT. Moodys Indonesia

Moodys Investors Service Singapore Pte. Limited

Mr. Frederic Walter Jacques Drevon2 Moodys Holdings Limited

Moodys Group UK Limited

Moodys Shared Services UK Limited

Moodys Group (Holdings) Limited

Moodys Investors Service Middle East Limited Moodys EMEA Holdings Limited

Dr. Min Ye3 Moodys Group Australia Pty Limited

Moodys Investors Service Pty Limited

Moodys China (B.V.I.) Limited

Moodys Asia Pacific Limited

Moodys Company Hong Kong Limited

Moodys Investors Service Hong Kong Limited

Moodys (Japan) K.K.

Moodys SF Japan K.K.

Korea Investors Service Inc

Moodys Investors Service (Korea) Inc.

China Chengxin International Credit Rating Co., Limited

Moodys Investors Service (Beijing), Limited

Moodys Singapore Pte Limited

Moodys Investment Company India Private Limited

Moodys Shared Services India Private Limited

Asia Securities Industry and Financial Markets Association Limited

Mr. Simon Richard Hastilow4 None

1 Ms. Jennifer Ann Elliott has ceased to be Director following her resignation from the Board with effect from May 24, 2013.2 Mr. Frederic Walter Jacques Drevon has ceased to be Director following his resignation from the Board with effect from May 24, 2013.3 Dr. Min Ye has been appointed Additional Director of your Company at the Board Meeting held on May 24, 2013.4 Mr. Simon Richard Hastilow has been appointed Additional Director of your Company at the Board Meeting held on May 24, 2013.


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(iii) Board Meetings/Annual General Meeting

During the year 2012-13, the Board of Directors of your Company met four times: on May 11,2012; August 3, 2012; November 2, 2012; and January 25, 2013. The agenda papers along withthe explanatory notes for Board Meetings are sent in advance to the Directors. In some instances,documents are tabled at the meeting and presentations are also made by the respective executives onthe matters related to them at the Board Meetings.

The previous Annual General Meeting was held on August 3, 2012.

Details regarding the attendance of Directors at the Board Meetings and the Annual General Meetingheld during the year 2012-13 are presented in the following table.


Director No. of Board No. of Board Whether Last AnnualMeetings Held Meetings General Meeting

Attended Attended

Mr. Dhruba Narayan Ghosh* 4 4 YesMr. Pranab Kumar Choudhury 4 4 YesMr. Naresh Takkar 4 4 YesDr. Uddesh Kohli 4 4 YesProf. Deepak Nayyar 4 4 YesMr. Piyush Gunwantrai Mankad 4 4 Yes

Mr. Amal Ganguli 4 4 YesMs. Jennifer Ann Elliott1 4 ** NoMr. Frederic Walter Jacques Drevon2 4 1*** NoDr. Min Ye3 4 NA NAMr. Simon Richard Hastilow4 4 NA NA

* Mr. Dhruba Narayan Ghosh resigned as Chairman and Independent Director of the Company with effect from February 1, 2013. Mr. Ghoshholds the position of Chairman Emeritus, ICRA Limited, from the said date.** Ms. Jennifer Ann Elliott attended 3 meetings through audio conferencing.*** Mr. Frederic Walter Jacques Drevon attended 1 meeting through audio conferencing.1 Ms. Jennifer Ann Elliott has ceased to be Director following her resignation from the Board with effect from May 24, 2013.2 Mr. Frederic Walter Jacques Drevon has ceased to be Director following his resignation from the Board with ef fect from May 24, 2013.3 Dr. Min Ye has been appointed Additional Director of your Company at the Board Meeting held on May 24, 2013.4 Mr. Simon Richard Hastilow has been appointed Additional Director of your Company at the Board Meeting held on May 24, 2013.

The necessary quorum was present for all the meetings.

(iv) Membership Term and Retirement Policy

According to the Articles of Association of your Company, at every Annual General Meeting, one-thirdof such of the Directors for the time being as are liable to retire by rotation, or, if their number is notthree or a multiple of three, then the number nearest to one-third, shall retire from office.

The Directors to retire by rotation at every Annual General Meeting shall be those who have beenlongest in office since their last appointment, but as between persons who became Director onthe same day, those who are to retire shall (unless they otherwise agree among themselves) bedetermined by lot. A retiring Director shall be eligible for re-election.


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(v) Code of Conduct

The Board of Directors has prescribed a Code of Conduct for all Members of the Board and theSenior Management of your Company. The Code of Conduct is available on your Companyswebsite www.icra.in.

All the Members of the Board and the Senior Management personnel of your Company haveconfirmed their compliance with the Code of Conduct for the year ended March 31, 2013.

C. Board Committees

In compliance with both the mandatory and non-mandatory requirements under the Listing Agreement,and the applicable laws, the Board has constituted the following committees:(i) Audit Committee(ii) Remuneration Committee(iii) Shareholders/Investors Grievance Committee(iv) ESOS [Employee Stock Option Scheme] Compensation Committee(v) Strategy Committee

The Chairman of the Board, in consultation with the Company Secretary and the respectivechairmen of these committees, determines the frequency of the meetings of these committees. Therecommendations of the committees are submitted to the Board for noting/approval.

(i) Audit Committee

The terms of reference of the Audit Committee include:

(a) Oversight of the Companys financial reporting process, and disclosure of financial information,so as to ensure accuracy of information.

(b) Recommending to the Board, the appointment, reappointment and, if required, the replacementor removal of the statutory auditors and the fixing of audit fees.

(c) Approval of payment to statutory auditors for any other service rendered.

(d) Reviewing, with the Management, the annual financial statements before submission to the Boardfor approval, with particular reference to:

Matters required to be included in the Directors responsibility statement that is a part of the

Directors Report under Section 217 (2AA) of the Companies Act, 1956; Changes, if any, in accounting policies and practices and the reasons for the same; Major accounting entries involving estimates based on the exercise of judgement by the Management; Significant adjustments made in the financial statements arising out of audit findings; Compliance with listing and other legal requirements relating to financial statements; Disclosure of any related-party transactions; and Qualifications in the draft audit report.

(e) Reviewing, with the Management, the quarterly financial statements before submission to the Boardfor approval, performance of the statutory and internal auditors, and adequacy of internal control.

(f) Reviewing the functioning of the Whistle Blower mechanism.

(g) Mandatorily reviewing the following information: Management discussion and analysis of financial condition and results of operations;

Statement of significant related-party transactions; Management letters/letters of internal control weakness issued by the statutory auditors; Internal audit report relating to internal control weakness; and Appointment, removal and terms of remuneration of the internal auditor(s).



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The Audit Committee consists of five Non-Executive Directors, of whom three are Independent Directors.The Chairman of the committee, Mr. Amal Ganguli, is a Non-Executive Independent Director.

The Composition of the Audit Committee is as under:

1. Mr. Amal Ganguli, Chairman1,2. Dr. Uddesh Kohli,3. Prof. Deepak Nayyar,4. Dr. Min Ye2, and5. Mr. Simon Richard Hastilow2.1 Mr. Amal Ganguli has been elevated from member to chairman of the Audit Committee with effect from May 24, 2013.2 Dr. Min Ye and Mr. Simon Richard Hastilow have been appointed members of the Audit Committee with effect from May 24, 2013.

The Statutory and Internal Auditors of the Company are invitees to the Audit Committee. The previousAnnual General Meeting of the Company was held on August 3, 2012, and it was attended by Mr.Dhruba Narayan Ghosh, the erstwhile Chairman of the committee.

The Audit Committee met four times during the year 2012-13: on May 11, 2012; August 3, 2012;November 2, 2012; and January 25, 2013. The following table presents the details of attendance atthe Audit Committee meetings held during the year 2012-13.

Director No. of Meetings Held No. of Meetings Attended

Mr. Dhruba Narayan Ghosh, Chairman1 4 4Mr. Amal Ganguli2 4 4Dr. Uddesh Kohli 4 4Prof. Deepak Nayyar 4 4Ms. Jennifer Ann Elliott3 4 *

1 Mr. Dhruba Narayan Ghosh has ceased to be chairman of the Audit Committee following his resignation from the Board with effect fromFebruary 1, 2013.2 Mr. Amal Ganguli has been elevated from member to chairman of the Audit Committee with effect from May 24, 2013.3 Ms. Jennifer Ann Elliott has ceased to be a member of the Audit Committee following her resignation from the Board with effect from May 24, 2013.* Ms. Jennifer Ann Elliott attended 3 meetings through audio conferencing.

The Company Secretary of your Company is the secretary to the Audit Committee.

(ii) Remuneration Committee

The Remuneration Committee is headed by a Non-Executive Independent Director. The committeeconsists of:

1. Prof. Deepak Nayyar, Chairman1

2. Dr. Uddesh Kohli2,3. Mr. Amal Ganguli2, and4. Dr. Min Ye2.

1 Prof. Deepak Nayyar has been elevated from member to chairman of the Remuneration Committee with effect from May 24, 2013.2 Dr. Uddesh Kohli, Mr. Amal Ganguli and Dr. Min Ye have been appointed members of the Remuneration Committee with effect from May 24, 2013.

During the year 2012-13, two meetings of the Remuneration Committee were held on August 3, 2012

and January 25, 2013.


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The following table presents the details of attendance at the Remuneration Committee meeting heldduring the year 2012-13.

Director No. of Meetings Held No. of Meetings Attended

Mr. Dhruba Narayan Ghosh, Chairman1 2 2Prof. Deepak Nayyar2 2 2Mr. Piyush Gunwantrai Mankad3 2 2Mr. Frederic Walter Jacques Drevon4 2 1

1 Mr. Dhruba Narayan Ghosh has ceased to be chairman of the Remuneration Committee following his resignation from the Board with effect fromFebruary 1, 2013.2 Prof. Deepak Nayyar has been elevated from member to chairman of the Remuneration Committee with effect from May 24, 2013.3 Mr. Piyush Gunwantrai Mankad has ceased to be a member of the Remuneration Committee with effect from May 24, 2013 following thereconstitution of the Remuneration Committee.4 Mr. Frederic Walter Jacques Drevon has ceased to be a member of the Remuneration Committee following his resignation from the Board witheffect from May 24, 2013.

The Company Secretary of your Company is the Secretary to the Remuneration Committee.

Remuneration Policy

Executive Directors

During the ye

Documents

AR2012 13 Final (Hyperlinked)